Swift, Onafriq, MOWALI, Thunes and others: On Mobile Money Interoperability in Africa

Summary

This article discusses the importance of interoperability in the banking and mobile money sectors. It explains interoperability for domestic and international banks, while mobile money interoperability is more complex and fragmented. The article mentions different initiatives and companies, such as Onafriq, Mowali, Thunes, and iPiD, working towards mobile money interoperability in Africa. It also highlights the challenges and regulatory hurdles faced in achieving this goal. It concludes by emphasising the need for collaboration, technical integration, and regulatory compliance to achieve comprehensive interoperability in the mobile money industry.

Cross-border remittance within Africa.

I have been viewing Kampala fabric (popularly known as Adire in Nigeria) on Instagram for over a month and finally decided to purchase some. The seller, Diana, is a young girl from Uganda. She supports her mother, who sells Kampala fabrics at Nakasero market, by showcasing the Kampala fabrics on her Instagram profile. I sent Diana a direct message (DM), and she shared her Ugandan Airtel money wallet. I proceeded with the payment, opening my MTN (Momo) Nigeria wallet to send the payment to her, but I encountered a snag. I cannot send money from MTN Nigeria to Airtel Uganda mobile money wallet.

So now you see that despite several infrastructural developments, initiatives and fintech innovations deployed to resolve these frictions, cross-border transactions, whether remittance or merchant payment, can sometimes be a pain.

So, what to do? Interoperability. Why? Interoperability is necessary for cross-border transactions as it enables seamless connectivity, standardisation, efficient payment processing, expanded market access, enhanced customer experience, reduced costs and friction, and regulatory compliance. Beyond technical and network interoperability, operational activities, including treasury, product development, compliance, and regulatory interoperability, are also as critical. But first, let us understand interoperability.

Interoperability: What does that even mean?

Interoperability is the seamless exchange of information and collaboration between different systems or platforms. In the context of banks, it means enabling effective communication and data sharing among various financial institutions. This capability empowers customers from Bank A to transfer funds to customers holding accounts in banks B, C,D, etc.

Nationally, the infrastructure powering domestic interoperability is called the domestic switch. Nigeria Inter-Bank Settlement System Plc (NIBSS) is Nigeria's domestic switch. Ghana's Ghana Interbank Payment and Settlement Systems (GhIPSS) enables both mobile money and bank interoperability. Kenya achieved full interoperability of mobile money operators in 2022. Interoperability between mobile wallets and bank accounts, individually and collectively, reduces payment friction significantly in markets where these accounts are prevalent.

While achieving a positive interoperability development at the domestic level is good, it becomes even more advantageous at the cross-border level, fostering excellent financial connectivity and efficiency. At the cross-border level, regulatory interoperability becomes more important due to the involvement of multiple countries and their respective regulatory frameworks.

So, what works at the cross-border level if domestic switches facilitate interoperability among domestic banks?

Traditionally, Swift (Society for Worldwide Interbank Financial Telecommunication) is a platform for domestic and international banks to achieve interoperability. Swift was established in 1973, and its global financial infrastructure spans every continent, over 200 countries and territories, and services more than 11,000 institutions worldwide. Banks use Swift to process cross-border bank transfers. Banks leveraging the Swift network use standardised protocols to communicate with each other. While big corporates use Swift for high-value B2B transactions, Swift Go was created to cater to consumers' and SMEs' low-value payments through participating Banks.

Most card networks are also interoperable. Remittance platforms such as WISE leveraged card network infrastructures such as Mastercard Send and Visa Direct, amongst other partnerships, to facilitate cross-border transactions. They achieve this by charging cards tied to individuals or business bank accounts to debit and credit value to bank accounts.

What about cross-border mobile money interoperability?

Mobile money interoperability is more complex. Now, you are thinking, if Swift is for banks, what then is for mobile money wallets? Unlike Swift, cross-border mobile money payment/transfer services interoperability is fragmented. GSMA recorded 154 mobile money providers in Africa in 2022. M-Pesa, Orange Money, MTN Mobile Money, and Airtel Money are some of Africa's top mobile money services. Ideally, interoperability in mobile money means that users of different mobile money services can send money to each other, even if they are offered by various mobile network operators (Telco) or non-telco providers (Banks and others). Achieving cross-border interoperability in mobile money requires these telco services to establish connections. This connection involves coordination, signing agreements, technical integration, regulatory compliance, and other considerations between the involved parties.

Mobile Money Data in Africa

According to GSMA, globally registered mobile money accounts grew from 1.35 billion in 2021 to 1.6 billion in 2022, with more than $3.45 billion in daily processed transactions, while the total transaction value for mobile money was $1.26 trillion. In 2021, Africa had over 621 million registered accounts, about 45% of global registered accounts in the same year. This data shows that there is a market here. Reducing existing interoperability friction in the market is anticipated to increase the daily processed transaction counts and value. So, in 2023, why isn't mobile money interoperability on the front burner?

Historical Efforts at Mobile Interoperability

A.??? Swift unpredicted mobile money industry shift.

In 2012, Swift advised banks to consider making a bolder move in mobile transfers through collaborative efforts with mobile money providers. It referenced Bank-mobile Money Service partnerships such as Equity Bank, Kenya and M-Pesa, State Bank of India and Airtel, Banamex, and América Móvil as successful partnership deployment in respective countries. While exploring who would bell the cat on the interoperability of mobile payment (for bank accounts and mobile money) at a global level, Swift suggested the Mobile Industry Association (GSMA), the interbank world (Banks' retail organization), the mobile payments association (Mobey Forum), the international standards body (ISO), a platform vendor and SWIFT itself. While acknowledging several new entrants in the mobile payment services industry including Mobile network operators, remittance companies, and card networks) it noted that only a handful of them have successfully attracted a significant user base (over 1 million users).

In 2012, specifically for mobile money services providers, about 83% had fewer than 100,000 active accounts, and only four (2%) had more than a million active users. Well, a lot has changed since 2012. Considering the 10-year growth trajectory, the mobile money industry's evolution has defied every expectation, growing from 134 million registered accounts in 2012 to 1.35 billion in 2021. Without Africa-wide payment infrastructure integrations, telcos with multicountry operations where micro-regional agreements such as EAC, SADC, ECOWAS, COMESA, and WAEMU exist permit intra-Africa cross-border payment if respective countries' payment regulators agree. Within these regional frameworks, regulatory interoperability trumps technical or network interoperability.

Swift is still deepening connectivity but not yet for mobile money service.

Though Swift's interest in mobile money interoperability remains to be seen, SWIFT is still doubling down on interoperable cross-border payment efficiency. In September 2023, Swift announced two partnerships with competing Fintech companies, WISE and Visa. Though Swift and WISE had previously worked together, this partnership means financial institutions can route Swift payment messages through WISE's white-label service, WISE Platform, via its new Correspondent Services solution. This partnership will enable financial institutions to continue to initiate payments via Swift with the same MT or MX messages but have them sent via WISE. On the other hand, Swift's collaboration with Visa enables both companies to improve their connectivity and increase the number of endpoints.

B. Onafriq (Former MFS Africa)- An old kid on the block.

In 2018, almost a decade after he founded Onafriq, Mr. Dare, Onafriq's Africa's CEO, graciously welcomed Mowali- the new kid on the block. It's rare to see start-ups include their competition, but that was in 2018. The MowaIi initiative, funded by the Gates Foundation, had the backing of two mobile money giants (MTN & Orange). Mr. Dare's welcome note was a mix of optimism and pessimism- he mentioned that he had witnessed several formidable players enter and leave this space; moreover, a technical solution was only part of the answer. Because "for an interoperability hub to succeed, operations, treasury, product development, and compliance are equally, if not more critical."

Onafriq has been in the mobile money interoperability business for the longest time, watching the industry evolve. Onafriq started connecting mobile wallets to enable international remittances in 2012 and mobile-to-mobile regional payments in 2014. As of September 2023, Onafriq stated that Africa's digital network connects over 320 million mobile money wallets to enable cross-border payments for remittance companies, financial service providers, and global merchants. Based on this, Onafriq could be Africa's largest mobile money inter-operability hub, connecting several mobile network operators across the continent through a single API. Across nine (9) funding rounds, Onafriq has raised a total of $250.2M and made four (4) acquisitions.

C. Rest in Peace, Mowali! But wait, what killed the Mowali initiative?

How did Mr. Dare foresee the death of Mowali? Mowali is a joint venture launched by Orange and MTN in 2018 to make an interoperable payment network available to mobile money operators. At first, the platform would become interoperable for 100 million subscribers from MTN and Orange in twenty-two (22) sub-Saharan African countries and then interconnect over one hundred and fifty-four (154) mobile money services deployed in Africa in the long term. This audacious ambition didn't see the light of day as regulatory policies thwarted it. How? Mowali, registered in Cote'd Ivoire, the financial Centre of French West Africa, competed against the ambition of the Central Bank of West African States (BCEAO) to launch its interoperable hub for intra-UEMOA financial transactions, which has been under development since 2017. So, the regulatory approval never came. BCEAO consists of eight member states: Benin, Burkina Faso, C?te d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

Another dead end to MTN and Orange Africa-wide mobile money interoperability.

In 2020, after BCEAO entrusted an account-to-account (bank and non-bank) exchange payment infrastructure to the Groupement UEMOA interbank electronic banking system (GIM-UEMOA), MTN and Orange reoriented their vision and invested in international transfers between different currency areas. This vision also hit another regulatory roadblock as the implementation of interoperability, even between subsidiaries (MTN Uganda and MTN Cote d'Ivoire), is subject to the regulators' approval. Also, MOWALI responded to the call for tenders launched by the BCEAO to select the manager of its interoperability platform but was not preselected. Eventually, MOWALI got the memo. It couldn't compete or collaborate with regulators, so it discontinued operations following a decision by the stakeholders. Mr. Dare did foresee regulatory challenges. Regional priorities often trump private sector ambition, with payment as a utility and in direct competition with a regulatory project, the tussle is hardly a win-win.

D. New Fintech (non-telco) riding on payment using the phone number.

International Payments Identity (iPiD), founded in 2021, is an international payment addressing platform. Founded by SWIFT veterans, iPiD propagates the possibility of paying and getting paid anywhere based on a phone number or email address. From a customer experience perspective, figuring out the correct BIC code, branch name, IBAN, BSB code, IFSC code, etc, can be daunting. iPiD enables proxy payments anywhere in the world with a single API powering the proxy look-up, request-to-pay, and pay-to-wallet services.

This business model makes for a fascinating watch as payment to mobile money accounts is based on phone numbers. Phone numbers identify telco-led mobile money wallets, so an infrastructure built to make payments to a phone number would scale for mobile money users. At the bank level, this feature is already applicable in some jurisdictions. For example, using the Hong Kong Faster Payment System (FPS), bank account holders could send money to other bank accounts using the recipient's phone number or email address.

Though iPiD is the youngest interoperability industry player, the leadership team, compromised of five (5) males, has a combined experience of 56 years working at SWIFT and eight years at Thomson Reuters. This level of expertise makes it formidable and a company to watch.

E. Thunes - International remittance funds termination

Thune announced its connection to over 1.5 billion digital wallets and its "send-to-wallet" functionality, which covers 78 global digital wallet providers, during its latest series C round funding of $72 million in July 2023. Thune was founded in 2016 as a global B2B payment infrastructure platform. In Africa, Thunes states that it operates in 35 countries and partners with all major mobile wallet operators and regional banks, resulting in a real-time and interoperable network with over 200 routes for cross-border payments. Thunes mentioned that it adopts a collaborative approach to resolving interoperability challenges by working with regulatory bodies and partners. What is spectacular about Thunes is its global outlook and its acclaimed reach of 1.5 billion digital wallets across 44 countries and territories. Thunes connects remittance companies to payout into top mobile wallets in Asia and Africa.

F. A host of PSSPs either leverage Onafriq or connect directly with one telco at a time.

While mobile wallets in Africa are mostly used for P2P and low-value transactions, microscopic PSSPs integrate directly with Mobile wallets or resell Onafriq to end users- primarily for remittance into the continent. Often, they tout integrating several mobile money services and other payment providers into a single API for merchants and remittance companies. In 2021, MTN partnered with Flutterwave to extend its mobile money wallets to businesses integrated with Flutterwave in Cameroon, C?te d'Ivoire, Rwanda, Uganda, and Zambia to receive payments via MTN Mobile Money (MoMo).

Tying it all together.

In conclusion, the race to achieve mobile money wallet interoperability in Africa is critical to fostering financial inclusivity and seamless cross-border transactions. While banks have long-established systems like Swift for international interoperability, the complexity of mobile money services poses unique challenges in two dimensions: technical and regulatory interoperability. The presence of 154 mobile money services operating on different technical infrastructures and adhering to country-specific regulatory requirements creates a network gap.

Onafriq stands out as a mobile money service interoperability network connecting mobile wallets across the continent and enabling cross-border payments. Meanwhile, the Mowali initiative, backed by Orange and MTN, faced regulatory hurdles that ultimately led to its discontinuation. Amidst the evolving financial landscape, newer players like Thunes are making strides with their global outreach and extensive network of digital wallets, catering to the increasing demand for international remittances. The vision of International Payments Identity (iPiD) also holds promise, aiming to facilitate payments based on phone numbers or email addresses, potentially simplifying mobile money transactions further. Various Payment Service Providers (PSSPs) are emerging in the race for mobile money wallet interoperability, offering innovative solutions to bridge the gap between mobile wallets and end-users, particularly for remittances.

What to do?

As the African mobile money industry continues to grow and evolve, collaboration and technical integration, though vital, would require regulatory interoperability to achieve comprehensive interoperability. At a national level, most African countries have a domestic switch that enables bank and non-bank accounts interoperability. With a regulatory pass, aggregating these domestic switches into an API operated by a network can create interoperability.

At a product level, telcos with multi-country operations can leverage their cross-border operations to create a private infrastructure that bridges the regional payments gap, especially for businesses. Telcos have large customer bases, agent networks, and unique datasets; telecom companies have a natural advantage in the payments space.

Aggregating these mobile money services at a country level in the current diverse regulatory landscape would take a lot of work, especially as there is no regional KYC and open banking framework. Filling these gaps could make interoperability slow.

With the efforts of the key players mentioned above and technological advancements, a future where Nigerians can easily pay Ugandan vendors through their respective mobile money wallets is an exciting possibility.

?***About the authour_Based in Hong Kong and the United Kingdom, Ifunanya built her career in Nigeria across retail, commercial, and corporate banking.?More recently, her experience includes being a pioneer employee in Africa's fintech sector and working in Hong Kong’s fintech scene. She is currently undertaking a Master's degree in Finance (Analytics and Fintech) at Hong Kong Baptist University. She hopes to leverage her understanding of technology-enabled financial solutions, customer-centric approaches, and innovation in financial services to work in sectors that focus on Digital Financial Services. If you've enjoyed this piece, don't hesitate to like it, leave a comment, and share the article with others.

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